Romanias C/A deficit shrinks 7% y/y in Jan-Nov.

By bne IntelliNews January 16, 2012
Romania's current account deficit narrowed by an annual 7% to EUR 4.23bn in the first eleven months of 2011 mainly due to an 11.7% decrease in the trade gap, central bank reported. Thus, the C/A gap further eased to 3.3% of GDP from 3.7% of GDP in Jan-Nov 2010. The potential for further C/A consolidation, however, is low as the deficit has already narrowed three-fold from an unsustainable 11.6% of GDP in 2008 to 3.8% of GDP in 2010. It is expected to have remained close to 3.5% in 2011. The C/A deficit in the past 12 months bottomed out to EUR 4.3bn in November after reaching an eight-year low of EUR 3.5bn in May. IntelliNews Comment : The shrinking net foreign direct investment (FDI), the scarcer external financing and hopefully the better absorption of EU funds are the key drivers for the balance of payments' dynamics on the short run. The three drivers, however, have mixed and moderate effects on the C/A gap, therefore we do not expect any particular BoP adjustment for this year. Certain weakening of the local currency should in principle help C/A consolidation via foreign trade effects but for the time being no major exchange rate corrections are predicted. Net FDI narrowed by 36% y/y to EUR 1.64bn in Jan-Nov, or 1.3% of the projected GDP. The FDI thus covered only 39% of the C/A gap, down from 57% last year.
Current Account (EUR mn)
2008 2009 2010 Jan-Nov 2010 Jan-Nov 2011 y/y
Current Account -16,157 -4,915 -4,591 -4,531 -4,230 -7%
% of GDP* -11.6% -4.2% -3.8% -3.7% -3.3% n.a.
A. Goods and Services -18,450 -7,165 -6,609 -5,965 -5,411 -9%
Goods -19,109 -6,871 -5,864 -5,399 -4,765 -12%
Services 659 -294 -745 -566 -646 14%
B. Incomes -3,683 -1,902 -1,960 -1,711 -2,026 18%
C. Current Transfers 5,976 4,154 3,411 3,145 3,207 2%
FDI 9,310 3,554 2,238 2,561 1,639 -36%
% of full-year GDP 6.7% 3.1% 1.8% 2.1% 1.3% n.a.
% of CA deficit 58% 72% 49% 57% 39% n.a.
Source: BNR, IntelliNews

Romanias C/A deficit shrinks 7% y/y in Jan-Nov.

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